How much per month?

One of the more popular questions asked by new aspiring traders is ‘how much can I make per month from trading?’ The answer of course is not straight forward for a multitude of reasons but I will attempt to give some thoughts on it here. A trader with a 50% win rate, risking 1% of capital per trade with a risk to reward ratio of 1:2 will make 2% a month if they take 4 trades over the period.

Obviously this is assuming the stats are maintained each and every month (we know that with a 50% win rate that doesn’t actually mean that each month there will be 2 winners and 2 losers but we’ll use it as an average). So in order for a trader to improve on this return, they can do one of a few things; increase the risk per trade, increase the trade frequency, increase the win rate or increase the risk to reward. Immediately we are now introducing variables that can lead to a number of different end results.

If we simply take trade frequency and leave the win rate and risk to reward the same, simply doubling the number of trades (provided this is possible) would increase the percent return. So as you can see, when asked by a new trader how much they could make, the answer is actually quite complicated to give.

One thing I can say is that many individual traders have the ability (due to not having liquidity constraints) to put in quite fantastic gains. Again, what one individual sees as fantastic may not be what another thinks. For example, a trader may be really happy making 3% a month whereas another trader may prefer to make 10%. So who’s going to be the better trader? Well let’s consider that the first trader is trading with £500,000 in their account and the second trader has £1500. Who’s creating the better return? In percentage terms, it’s the trader with the small account but in monetary terms, the trader with £500k is making far more and probably with much less risk per trade too.

So there are a huge number of factors that come into play to determine how much a trader can or more importantly wants to make from their trading. One trader I know just made 30% in July which is a huge percentage return. Could you do that on a £10k account? Absolutely. Could you do it on a £1 million account? Less likely.

The real answer to how much can I make from trading should be ‘how much would you be comfortable with making based on the strategies and attitude to risk you have’. That will then give the trader a better guide….

Moving over to the currencies, on the back of a strong NFP report last Friday, the USD rallied and pushed the Euro lower. However it closed well off its lows of the session. If it breaks Friday’s low, look for a test of 1.0950 but if it breaks Friday’s high, a run to 1.1250 could be on the cards…

eurosimon

Have a great week

Charlie Burton

Ezeetrader

Join Charlie in his live trading room for 2 days – click here

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